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Department of Commerce & Downpayment Assistance Programs

From time-to-time the Department of Commerce receives calls regarding the legality of "Downpayment Assistance Programs." This article is taken from information the Department has provided the Minnesota Association of REALTORS® to help you determine the validity of these arrangements.

The Department does NOT specifically prohibit or even discuss down payment assistance programs in the real estate laws or mortgage origination laws. However, if the VALUE of the property is artificially inflated to cover the cost of the downpayment offered by the assistance program, then the Department would have jurisdiction to review the transaction involving this type of activity. However, the Department of Commerce would only have jurisdiction over the licensees involved, i.e., real estate agent, broker, appraiser and mortgage originator. The Department does not license down payment assistance programs and therefore has no jurisdiction over those activities.

IRS Targets Down-Payment-Assistance Scams

Seller-Funded Programs Do Not Qualify As Tax Exempt

WASHINGTON – Organizations that provide seller-funded down-payment assistance to home buyers do not qualify as tax-exempt charities, the Internal Revenue Service said in a ruling released today.

Down-payment-assistance programs provide cash assistance to homebuyers who cannot afford to make the minimum down payment or pay the closing costs involved in obtaining a mortgage. Such programs can qualify as tax-exempt charitable and educational organizations under Internal Revenue Code section 501(c)(3) when properly structured and operated. In Revenue Ruling 2006-27, released today, the IRS provides a detailed discussion of the guidelines - including two examples that meet - and one that fails to meet - the tests for exemption.

Legal Brief: Contract Formation Series

"Do We Have a Deal?"

by Brad Boyd, esq. Thomsen & Nybeck Law Firm

Since transactions are occurring less frequently than when the market activity was more robust, it has become even more essential to understand (and to help your clients understand) basic contract principles. Whether you are representing a buyer or seller, a universal question both parties will want to know is, "Do we have a deal?"; meaning, has a final contract been agreed upon? To help you recognize when a contract becomes binding and enforceable consider the following scenario:

Buyer submits offer for Seller's home for $300,000 with a June 2nd closing date; Seller then "accepts" with a June 1st closing date (because June 2nd is a Saturday). Is this a contract?

Affiliated Business Arrangements Meeting

The Minnesota Association of REALTORS® is providing an opportunity for members to be updated on matters related to the DOC enforcement actions regarding Affiliated Business Arrangements.

These meetings are being offered to help members understand the implications for affiliated business arrangements. A question and answer period will be part of each program. Don Smith and MNAR Legal Hotline attorneys will lead the discussion.

This meeting is for REALTOR® members only. There is no cost to attend. Online registration is required and space is limited.

This newsletter was sent to [email address suppressed] at your request as a member of the Minnesota Association of REALTORS®. If you no longer wish to receive these emails, you may unlist yourself immediately. You may also unsubscribe via postal mail by writing to Minnesota Association of REALTORS®, 5750 Lincoln Drive, Edina, MN 55436. Be sure to include your email address.